Leaders of five of the world’s fastest-growing emerging economies have agreed to create a development bank to help the funding of US$4.5 trillion in infrastructure development programmes and to bypass the World Bank.
Indian prime Minister Manmohan Singh, Chinese president Xi Jinping, South African president Jacob Zuma, Brazil’s president Dilma Rousseff and Russian president Vladimir Putin, representing the five countries collectively termed the BRICS, agreed the initiative at a summit held in Durban, South Africa,
While details are sketchy at this early stage, reports suggest that the new bank will have US$50bn of seed capital shared equally between Brazil, Russia, India, China and South Africa although it was indicated that China is likely to play the biggest role in the development.
“The potential of Brics development is infinite,” said Xi Jinping. “The real potential of Brics co-operation is yet to be realised.”
Summit host president Zuma, whose country is bidding to be home to the bank, said formal negotiations to establish the institution were “based on our own considerable infrastructure needs which amount to about US$4.5 trillion over the next five years”. The bank will also cooperate with other emerging market countries and developing economies.
He added that the bank also will establish a BRICS contingent reserve arrangement, to cushion member states against any future economic shocks and further lessen their dependence on Western institutions.
“Russia supports the creation of this financial institution,” said president Putin, but added: “We believe that, if it is created, then it must work on market principles only and support the business of all our countries.”
Earlier, before negotiations got underway, Putin pointed out the economic success of the five BRICS nations. “The common annual economic growth rate in 2012 constituted 4%, in contrast to the 0.7% of the [biggest] seven financial countries,” he said.
The group confirmed that further talks would be held to finalise where the bank is based and how much capital it will receive. The Brics nations currently represent more than 40% of the world’s population and 17% of global trade.
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